For the full year, the company reported revenue of about Rs 1.65 trillion, up 4.6 per cent but on a constant currency basis revenue was down 0.8 per cent.
Analysts' view on Q4 numbers
Commenting on the performance, Rajesh Gopinathan, chief executive officer and managing director, TCS, said the company entered FY22 more confidently and with better visibility. “As I have stated in the past, growth is being led by core transformation opportunities such as cloud migration, application transformation, and digital services. Our focus going into FY 22 will be to engage with clients in their growth agenda, propelled by innovation and leverage of collective knowledge,” he added. READ MORE HERE
The results, however, elicited mixed response from analysts as they fear that despite a strong earnings show, the stock is trading at premium valuations and has factored-in most of the positives. Therefore, the stock price may have limited upside from here on.
Sudheer Guntupalli and Hardik Sangani, research analysts at ICICI Securities, for instance, have downgraded the stock from 'Add' to 'Hold' as they believe the industry growth is unlikely to witness a meaningful acceleration (vs pre-Covid) over medium term as is expected by the street. Moreover, given the good pace of vaccination in core markets
like US / UK, potential resumption of costs related to marketing events / onsite travel (in H2FY22) is a key thing to watch out for.
"As we rebase our exchange rate estimates (now INR/$ = 75/76 for FY22/FY23E), FY22E EPS witnesses around 5 per cent upgrade even as FY23E EPS remains largely stable. We downgrade the stock to HOLD (from ADD earlier) with an unchanged target price of Rs 3,350 (implying 30x FY23E EPS)," they said in a result review report.
That said, in the context of 2nd wave in India, they expect TCS
to command relative investor interest given low / no disruption to IT and perception of the stock as a cash proxy during heavy market volatility.
Those at Kotak Institutional Equities, too, maintain 'Reduce' rating on the stock owing to the stock's expensive valuations. "At 27.4X FY2023E, upside is limited. We maintain our REDUCE rating. Our EPS increases by 2-3 per cent due to a change in INR/USD assumptions by KIE’s economist. Fair value increases to Rs 3,250 due to roll over and after baking in EPS revision," they said in a report.
Globally, foreign brokerage Citi has a 'Sell' call as valuations at 31x 1yr forward (2-SD above mean) is pricing-in positives. Nomura, on the other hand, has 'Neutral' rating on the scrip and they suggest investors to await better entry point.
That said, Credit Suisse (Outperform; TP: Rs 3,750), CLSA (Outperform; TP: Rs 3,370), Goldman Sachs (Buy; TP: Rs 3,646), and Macquarie (Outperform; TP: Rs 3,640) remain positive on the stock as they believe the sector has entered technology upcycle where TCS
may continue to deliver industry leading growth.
"TCS is on track for double-digit growth for FY22 and remains well positioned to benefit from 3 key spending themes: cloud transformation, customer experience, & core modernisation," brokerage firm Macquarie said in its result review report.
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